Navigating Canadian Cabotage

In August, the Canada Border Services Agency issued a notice on the enforcement of cabotage laws restricting the movement of domestic goods by foreign-based commercial transportation businesses. If officials haven’t strictly enforced the laws in the past, this may be changing.

Consequences for noncompliance include detentions, assessment of duties, taxes, interest, penalties, cancellation of a carrier’s enrollment in trusted trader programs such as Free and Secure Trade and Customs Self Assessment, forfeiture, ascertained forfeiture and criminal liability.

The duty-free entry of foreign-based trucks and trailers used for international commercial transportation is permitted under conditions. In particular, they must be owned or leased and imported by a foreign-based person; leave from and return to the foreign country in the normal course; be controlled from the foreign country; and be exported within 30 days of the import (or for a period not exceeding 24 months where the export of the truck is delayed in specified circumstances).

They also may be used for the commercial transportation of goods from one point in Canada to another in Canada under conditions. In particular, the transportation must be incidental to the international traffic of the imported or exported goods; the transportation must not occur outside Canada; and the truck must not enter Canada for an in-transit movement to a point outside of Canada.

Moves qualify as incidental moves under the following conditions: “minor deviations” may be made from the international route; one incidental move may be made per international trip to pick up or drop off domestic goods while carrying less than a full load of imported goods or goods to be exported; and the incidental domestic move must occur during or immediately before or after the international move.

A foreign-based truck and trailer does not qualify for duty-free entry into Canada if it will leave Canada during the trip.

A foreign-based truck or trailer that has entered Canada duty-free, loaded with goods in transit to a point outside Canada, is not permitted to carry domestic goods within Canada. For example, a foreign-based truck and trailer wouldn’t qualify for duty-free entry into Canada to haul goods from Seattle to pick up goods in Vancouver, British Columbia, drop them off in Prince George, British Columbia, and then travel to Anchorage, Alaska.

A foreign-based truck may be used to move goods between two Canadian points following delivery of a load of imported goods, if the vehicle is en route to pick up a scheduled load of goods for export from Canada. The following conditions apply: the export load must be scheduled for pickup when the contract for the domestic load is made; the drop-off point for the repositioning load must be in line for the pickup of the export load; and, only one repositioning move is permitted.

For example, a foreign-based truck and trailer hauling goods from New York to Ottawa could schedule the pickup of an export load in Montreal for delivery in Boston. After delivery to Ottawa, the truck and trailer could be used to load goods in Ottawa for drop-off at Rigaud, Quebec, (because Rigaud, is located between Ottawa and Montreal on the most direct trucking route).

Foreign-based shipping containers may be imported into Canada duty-free where the transportation doesn’t occur outside Canada; and the container hasn’t entered Canada for in-transit movement through Canada to a point outside of Canada.

Containers must be exported within 365 days of their import (or for an additional period not exceeding 24 months where the export of the containers is delayed for specified reasons).

For example, a foreign container arriving in Vancouver, British Columbia, from Hong Kong can enter Canada duty-free to haul domestic goods within Canada. However, a foreign container loaded with goods in Boston, topped up with domestic goods in Kingston, Ontario, for delivery to Toronto and destined for Flint, Mich., does not qualify.

The North American Free Trade Agreement allows foreign drivers to enter Canada as business visitors. Drivers may transport goods or passengers to Canada from the U.S. or Mexico, or load and transport goods or passengers from Canada to a NAFTA territory. However, it does not authorize a foreign driver to load and unload domestic goods in Canada.

A foreign truck driver must meet other conditions to qualify as a business visitor, including: the driver must be an American or Mexican citizen; must show the purpose of the trip is international; that he or she isn’t seeking to enter the local labor market; that the primary source of remuneration for the work is outside Canada; and that the principal place of business is outside of Canada.

The CBSA has signaled plans to enforce cabotage laws affecting the trucking industry more vigorously. This may have been triggered by suggestions that Canadian enforcement has been lax when compared to U.S. enforcement. Companies involved in the transportation of goods into Canada can steer clear of costly issues by reviewing corporate practices, and determining whether they comply with Canadian customs and immigration laws.

Daniel L. Kiselbach is a partner at the Vancouver, British Columbia, law firm of Miller Thomson. Contact him at 604-643-1263 or dkiselbach@millerthomson.com.

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